A record number of UK and international landlords registered as a limited company last year to take advantage of tax benefits.

Investment specialist Thirlmere Deacon reports a total of 41,700 buy-to-let incorporations in 2020, an increase of 23% on 2019, taking the total number of buy-to-let firms to 228,743. The numbers have more than doubled since 2016 when tax changes for landlords were introduced via Section 24 of the Finance (no. 2) Act 2015.

Between 2016 and 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined. 

Thirlmere Deacon has seen a spike in international investors enquiring about forming a limited company, up 62% year on year. More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London; together, London and the South East accounted for almost half (47%) of all incorporations.

- Advertisement -

Second largest

Firms set up to hold buy-to-let properties were the second most common founded during 2020, after companies selling goods on-line and by mail order.  

Landlords holding property in a limited company have the ability to offset 100% of mortgage interest against profits, while those holding a property in their own name can offset just 20%, says CEO Stuart Williams.

Landlords can grow their portfolio more quickly using a company, as there is no income tax on the retained profit, allowing more cash to re-invest. He says although corporation tax is payable on trading profits, this is lower than the higher income tax rate.

Adds Williams (pictured): “Running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose – all paid for by the tenants.”

Read advice on limited companies.

Visit Thirlmere Deacon.

3 COMMENTS

  1. As long as landlords are considered the pariahs of society by the woke media then the government (even a Tory one) will use landlords as a cash cow.

    • Correct unless LL stop mortgaging in their name.

      Unless a LL can stay below the 40% tax threshold then investing via a company remains the only logical method
      S24 makes investing in a name pointless.

      Those LL looking to the future will inevitably convert to corporate methods.

      It means many LL will need to convert or sell up if S24 is unviable for them.

      It is highly likely that Govt will come for small corporate LL.

      It cannot allow them to escape tax on fictitious income as it seeks to eradicate small LL.

      So however Govt does it they will introduce a S24 style tax to get rid of small corporate LL.

      Govt simply can’t allow LL to escape the S24 tax burden by moving to corporate status.

      Pulling income out of a corporate setup is awkward.

      But if considering not withdrawing profits then being a corporate LL is effective especially if investing in a pension.

      But how many LL want to delay gratification for 30 odd years!?

      There is also no doubt that Govt will be taxing wealth til the pips squeak.

      This means 2nd property owners of which LL own the majority.

      That means LL wealth will be taxed into oblivion as that is where the money is.

      Govt knows that it can attack LL wealth with impunity.

      It will not disadvantage the Govt electorally at all.

      LL are a cash cow ready to be squeezed of all that Govt can get out of them.

      Govt knows nobody apart from LL will care a jot for such LL.

      LL should be aware of these issues.

      Is it worth all the hassle of being an AST LL.

LEAVE A REPLY

Please enter your comment!
Please enter your name here